How first-time buyers can turn their dream into reality

Spring has arrived and as the clocks change and the weather warms up, many people are thinking about making a new start - and for lots of potential publicans, that means investigating a career in the pub trade.

It has become a cliché, but the roses round the door country pub still attracts numerous first-time buyers eager to get behind the bar of a traditional local pub.

But according to Barney Bettesworth, senior partner at Torquay-based licensed property agent Bettesworths, the dream country pub can easily become a nightmare if eager first-time buyers are ill-informed or starry-eyed.

"Buying a pub is like buying any other business," he said. "A decision should be based on sound business principles and not emotional ones."

For those people thinking about going into the licensed property market, the most important initial step is, of course, to get their finances in order.

"Assess your own financial position and worth. Work out how much capital you can raise after you have sold your house and paid off your mortgage. What savings do you have?" Barney said. "Having worked this out the next step is to find out what you can afford to pay and how much you are able to borrow."

According to experts, in broad terms it is possible to borrow about 70 or 80 per cent of the value of a freehold pub and up to 55 per cent of a leasehold pub but Barney warned: "It is vitally important to be sure that whatever business you buy, it not only supports the borrowing but gives you a reasonable living as well."

Financial advice is available from a variety of sources. Accountants are useful, as are bank managers, but it is important to remember if your bank manager is based in Nottingham he is not likely to be knowledgeable about the pub trade in Devon or Cumbria.

A member of the National Association of Commercial Finance Brokers can also give advice - and an initial consultation should be free of charge.

The Royal Bank of Scotland has a special package put together specifically for the licensed trade and potential customers can arrange a free consultation with a business development manager to discuss their needs. It also provides a business relationship manager to help with the day to day accounts once the purchase has been made.

So with the finance arranged the next step is to decide what to buy and where. Most first-time buyers will have a clear idea about which part of the country they want to buy in, so Barney advises contacting a pub agent in that area and asking for information on properties in a set price range to get an idea about what is available. It is also useful to take a trip to the area and visit pubs.

It is important not to be misled by information provided by agents, Barney said. "Pubs are not valued on turnover. Pubs are valued by applying an appropriate multiplier to the net operational profit," he explained.

"Adjustments are then made for other factors. Maybe the living accommodation is exceptional, maybe the business is trading grossly under its potential or conversely maybe the present owner has been there many years and is an exceptional operator.

"What will happen to you as a first-time buyer following someone so successful?"

The choice of whether to buy a freehold or leasehold business is likely to be determined by financial position.

Most people would prefer a freehold property, especially at a time when interest rates are reasonable.

However, Barney pointed out that often a leasehold is a way of entering the trade and buying a more substantial business that would have been priced out of reach as a freehold.

Professional training is essential. Some experience of working behind a bar is useful and the absolute minimum required to get a licence in most areas is the British Institute of Innkeeping's National Certificate for Licensees.

Good professional advice is also essential. A lawyer who is experienced in licensed property is vital, as is getting a quotation for fees and any other additional costs, such as Stamp Duty.

"All in all it is an expensive operation, but hopefully it will all come together and you will become master of your own future in your new business," said Barney.

It is also handy to find out why the pub is being sold as it can help you determine how negotiable the price is. Agents advise making an offer including the trade inventory as it is easier to raise an offer than reduce it.

"You will be very lucky to find the pub of your dreams," said Barney. "Inevitably what you buy will be a compromise. Always remember the golden rule - location, location, location.

"You can always change the style of the business or the property but you can never change the location."

"Success is a result of applying good business principles, setting realistic goals, working to them and enjoying making the most of a new way of life. At the end of the day you are your own boss and can take control of your own destiny."

What to remember when buying a pub for the first time​

• assess your financial position
• get initial advice from a financial adviser or bank manager - this should be free
• decide what you want to buy and where
• investigate the area and what pubs are available in your price range
• get professional training, for example the National Certificate for Licensees
• get sound professional advice from a lawyer who is experienced in licensed property
• remember - location, location, location.

• Bettesworths:​ 01803 212021 or www.bettesworths.co.uk
• Royal Bank of Scotland:​ Martin Cox on 07879 434075 or martin.cox@rbs.co.uk
• City Business Loans:​ Andrew Jones (member of the National Association of Commercial Finance Brokers) on 01392 495959.